Review of DyDx

Dy/dx is a trading platform for cryptocurrencies and supports margin trading for high leverages. On it, you can find USDC, ETH, and DAI. Uses like it because of the spotmarkets and they also do not have to pay gas fees which usually saps most of their profits.

dY/dX users are fortunate to be on a platform where there is up to five times leverage for Ether margin trading. 4-5 months ago, users in some countries were set up for 10 times leverage trading for perpetual Bitcoin futures such as BTC/USDC pair.

There is now provision for ETH/USD on perpetual futures. The leverage is 10x and ETH is used as the collateral. This also tends to have no expiry date.

With maker and taker fees, dY/dX made quite some amount of money that now puts it in a position to finish this year with some profits.

dY/dX was also able to combine decentralized exchange, derivatives and lending to the extent that users who saw the opportunities provided didn’t slack but instead traded in their numbers to give the exchange platform  a high trading volume that is quite significant for the DeFi market.

Trading Fee Discount on dYdX

Trading fee discounts are possible to the tune of 10%.

dY/dX Lending Rates

Lending rates vary according to the assets supported. For example, BAT and DAI have lending rates of 16.12% and 6.23% respectively. Others with their respective lending rates are ETH (0.25%), USDT (2.84%), USDC (2%), ZRX (1.92%), WBTC (0.14%)

History of dYdX
Antonio Juliano  established dYdX towards the end of 2017. The people that ensured its existence were mainly professionals in different fields so it facilitated the sharing of top quality ideas that made dYdX what it is today.

DYdX has organized two funding campaigns to date which gave it a total of $12 million. The first involved very few investors that gave $2 million while the second one brought in $10 million with most of the contributions from Paradigm.

The technologists that worked on the core did a nice job. Five people are currently working at dYdX as software developers. They are sure doing a good job there having worked in top places such as Google, Coinbase, Nerdwallet, and Bloomberg. There is also a group of 7 whose main task is to oversee operations and ensure that users get the best of experience.

Benefiting from dYdX
To gain anything from dYdX, one must first have a Metatask or any other web3 wallet.

Custodial services are not employed for collaterals when they are deposited by users. As this happens, it sets the pace for off chain transactions. The extra amount one pays during deposits and withdrawals is meant to settle expenses on gas. One of the benefits peculiar to dYdX is that orders do not take time to be processed because they can be effected with just a signature instead of queuing up on the Ethereum network.

Trading on leverage
DYdX stands out from others because of its new approach to margin trading. Margin trading presents an investor with the opportunity to do more than expected with the number of assets in possession.

There are two types of margin trading for dYdX users. The one called isolated trading is specific for just one type of asset while Cross margin gives margin trading opportunity for every asset a user has.

The amount that is given as collateral is known as margin. Before a trader can borrow capital, he must have an asset to use as collateral so that even if he is unable to pay back, the asset will cover the capital and also yield interest to the lender.

Margin trading is beneficial because it gives leverage. When a trader has some leverage, his account is capable of achieving more.

To take advantage of dYdX’s leverage, simply click on the “Margin” tab to get started.

Ethereum is used perform an isolated margin trade on a long position whereas a short position for margin trading is effected with DAI. Margin trading gives users the liberty to choose their own leverage from 100% to 500%.

The user will be told the full costs and what will remain if he decides to proceed with the trade.

Since the orders are done off-chain on dYdX, transactions are signed unlike other places where transaction fees must be approved. The performance of a margin trade can be checked under “Positions.” This is below the area called order book,

These following paragraphs will help you further differentiate between cross and isolated margins.

Isolated VS Cross Margin
In isolated trading, a particular amount is earmarked for trade and leverage for the transaction is first chosen. It is after setting this leverage that a user can determine the amount to be deposited. If there be any need for liquidation, it will only affect the isolated asset. So, this is just like limiting the benefits and risks of trading to just one asset at a time.

While assets are used one at a time in isolated margin, cross margin presents a situation where all of them are exposed at the same time. That means you can either be gaining or losing depending on if your account is positive or not.

Some dYdX users choose cross margin because it gives them the opportunity to change their ETH in smart contracts to DAI for more profits. This is just like giving USDC or DAI to ETH on a long position to get some extra gains. The implication is that while the ETH balance increases, the same amount that was lent to it will be subtracted from DAI or USDC, whichever one was used for lending.

About Perpetual Futures
More people became aware of dYdX this year after it started its Bitcoin perpetual features. It came with an amazing offer to users for margin trading on Bitcoin such that up to ten times leverage can be obtained from ETH. This has made trading volume to increase rapidly much more than what can be found in any other spot market.

Although so much profit can be acquired from this, it is quite a risky venture and not advisable for one who is not very conversant with the technicalities involved.

To get started on Bitcoin Perpetual Futures, you would need to deposit USDC after clicking on “Perpetual tab.”

Always remember that the account used for perpetual futures is different from that of Margin trading. They will be funded differently.

The similarity it has with margin trading is that there is up to 10x leverage but this time, USDC serves as the primary asset for BTC. Moreover, there are some slight differences in their terms and conditions.

“Equity” means what you have in your perpetual account. If you would like to take out something from the collateral you gave, you can only do so from your “free collateral” and this amount depends on the profits you have made.

The same procedures apply for ETH-USD futures but in this case, ETH is used as a collateral and not USDC.

Paying the Fees

The maker fees for ETH-DAI, ETH-USDC, and DAI-USDC are 0% while that for PBTC-USDC is -0.025%. The taker fees vary depending on the amount. If the user has more than 5 ETH, the maker fees are 15% for ETH-DAI and ETH-USDC but if it is below 5 ETH, the taker fees for the two pairs are at 50%. For DAI-USDC and PBTC-USDC, taker fees also depend on the amount of DAI available. If there is more than 1,000 DAI, their taker fees are 0.05% and 0.075% respectively but if DAI is less than 1000, then the taker fees will be 0.50% for both pairs.

About Lending
One beautiful thing about being a member on dYdX is that everyone who deposits some assets to the platform is eligible for interest immediately. If you are already a user, you can confirm this by going to the “Balances” tab.

This will lead you to where you can access the different rates for all the assets on the platform. It will come to your notice that the interest rates for each asset changes with time. The amount is affected by market forces.

If you would like to know what each asset’s interest rate is per time, simply proceed to where you have “Supply APR.”

You will also see the current APR when you click “Deposit” for each asset.

About borrowing

To get some assets on loan, use the ‘borrow” tab. You will also see an APR for the asset you want to borrow.

Remember that dYdX, and indeed most other lending platforms will not grant your request for a loan if you don’t provide a collateral.

However, dYdX provides one of the most competitive collateralization requirements. Most times, it begins at 1.25x collateralization while for margin trading, you can borrow with 1.15x collateralization although the standard appears to be 1.5x collateralization for others in the industry.

If you don’t want to continue with an open trade, you can close it after returning the assets borrowed with any interest it yielded by clicking “Outstanding.” Once this is done, you can take back your collateral into your own wallet.

Although the features on dYdX is already much better than what is available in most other protocols, the platform is promising to release more surprises soon. At the moment, dYdX only supports four assets (including USDC and DAI stablecoins) but there are indications that more will be released soon.

Even with the few available assets, many people consider it apart from Compound Finance when they want to lend their assets because there are varieties added to the usual borrowing and lending. The ability to earn so much with its margin trading and leverages is simply fascinating.

It would be nice to stay updated on their blog especially if you want to be updated with their fees and interest rates.

Comments (No)

Leave a Reply